Before you get a car loan: what you want to know
When shopping around for a new car, there’s plenty to consider. How to avoid a lemon, private or dealer, what mod-cons are a must-have, and what model is going to suit your changing needs. Sometimes the car loan is an afterthought. But there’s a few handy things to consider before you sign that dotted line:
How much you can afford
Only borrowing how much you can afford might sound like a no-brainer, but it can be hard to know exactly how much. A responsible lender will always assess your affordability, ensuring your likelihood to be able to afford repayments. But it’s ultimately up to the borrower to decide how much they can really afford. Use our handy online calculator to work out repayments, based on loan amount, loan period and interest rate.
As well as considering your current budget and situation, it’s best to consider your future situation for the full term of your loan. Are you planning a career change, new kids, new business or anything else that might impact your finances?
Overall cost of a car loan
A big part of knowing how much you can afford, is knowing the overall cost of a car loan. Monthly payments are of course important, but they don’t always reflect the total cost of your new car. Consider regular repayments, interest rate, length of loan and any lender fees.
Your credit score
It’s often handy to know your credit score before applying for any loan, since it generally impacts your chances of approval and your interest rate. Here at The Lending People, we like to look at your application as a whole. Meaning if your credit isn’t the best, you can still get approved, along with other positive aspects of your profile. Visit creditsimple.co.nz to check your own credit score for free.
The importance of bank statements
Generally, as part any finance application, you will be asked for recent bank statements. Lenders aren’t judging your midnight KFC run. But they are checking for signs of payday loans, repeated gambling, multiple missed payments and unarranged overdrafts. Too many can mean your loan application will be declined, but a lender with flexible criteria (like The Lending People) may still approve you with a missed payment here or there.
Variable vs fixed interest rate
Before you sign that dotted line it’s a good idea to check whether your interest rate is fixed or variable. Variable interest means changing interest rates, meaning unpredictable loan costs. A car loan with The Lending People are always a fixed interest rate, meaning no nasty surprises and easier budgeting.